Villages facing higher power costs

Power Cost Equalization holds down rural rates, but is linked to cities

Many Rural Alaskans will have to pay more for their power in the next year due to rising rates in Juneau and other urban centers.

Power rates overall will go up by nearly a kilowatt, following the Regulatory Commission of Alaska’s annual establishment of a new Power Cost Equalization Base rate.

“It will decrease the amount of PCE my folks get,” said Jodi Mitchell, general manager of the Inside Passage Electric Cooperative, the utility for Hoonah, Angoon, Kake and Klukwan.

“It does definitely negatively affect our communities,” she said.

The new base rate is to be 14.3 cents per kilowatt-hour, compared to the current rate of 13.4 cents per kilowatt-hour.

The increase comes at a time when other costs are rising as well, sometimes dramatically.

“It’s really hard on our customers,” Mitchell said. “It’s always been hard, but I know there a lot of people suffering out there.”

The state’s largest rural power provider, the Alaska Village Electric Cooperative, provides power for 54 villages, about 1/3 of the total, and watches costs carefully, said Meera Kohler, the utility’s president and CEO.

An increase in power costs will be just one expense facing village residents, she said.

“It’s always hard for them to pay their power costs, but its harder to pay their heating bills,” Kohler said.

The way PCE works is that a base rate is set by averaging the electric rates in Anchorage, Juneau and Fairbanks. Then, a state fund makes up part of the difference — above the base rate.

“If the base rate goes up a penny, then the PCE rate goes down a penny,” Kohler said.

Last year about $35 million was spent on PCE, with the increased base rate cutting about $1 million in PCE payments for the next year.

The rate increase came from increasing residential power rates in all three urban communities, with the largest percentage increase coming in Juneau, which still has the cheapest power at a cost of 12.1 cents per kilowatt-hour, according to the RCA.

Most expensive power was in Fairbanks, with a cost of 21.6 cents per kilowatt-hour. The three utilities that make up the Anchorage-area market were all between Juneau and Fairbanks.

PCE payments cover only the first 500 kilowatt-hours used each month, so many users pay much higher rates than that. The PCE rate applies to residential users and community facilities only. Businesses pay higher rates, and then have to pass those higher costs on to local consumers.

A bill in the Legislature that would have expanded PCE to businesses did not pass in the last legislative session.

Those power customers are exposed to the full 65 cent per kilowatt-rate that comes from the high cost of diesel power in villages, Mitchell said. Kohler said some rural villages up north have even higher rates than that.

“Our businesses are suffering bad,” she said. “I had really hoped the Legislature would provide PCE for them as well.”

IPEC is working to develop renewable power options for its customers, including Gratian Falls Hydroelectric Project for Hoonah, Kootznoowoo, Inc.’s Thayer Lake Project for Angoon and others.

Both Mitchell and Kohler said they were hoping that a fuel price decrease could come quickly enough to mitigate the impact of the PCE reduction.